You are here

Stiglitz Says U.S. Exported Recession To World

Stiglitz pointed out that the system in which the dollar is the global reserve currency "has long been recognized to be unsustainable in the long run", but warned that the system's falling apart "can contribute a great deal to global instability".

[Global: World Recession]

Joseph E. Stiglitz, Nobel Laureate in Economics (2001) and Columbia University professor spoke at the United Nations about the current global economic downturn, its causes, and possible ways out of the crisis.

He characterized the problem as a global crisis that has a "made in the USA label on it" and stated that the United States exported its deregulatory philosophy and its "toxic mortgages" and now is "exporting our recession".

"We exported our deregulatory philosophy; we exported our toxic mortgages - and we thank the rest of the world for buying all our garbage, because if we hadn't, our downturn would be much worse – and now we are exporting our recession, but that simply highlights the fact that we have to look at these problems from a global perspective," he said.

"The system in which the dollar is the reserve currency is a system that has long been recognized to be unsustainable in the long run."

He added: "It's a system that is fraying, but as it frays it can contribute a great deal to global instability, and the movement from a dollar to a two-currency or three-currency, a dollar – euro, is a movement that will make things even more unstable."

"Part of the problem that the world is facing today is this problem of inequality, but again unless we are very careful, some of the remedies that we are proposing, that are going on now in the advanced industrial countries may exacerbate the problem of inequality."

"We are bailing out American banks, and more accurately, we are bailing out American bankers."

"Fortunately, many of the developing economies did not follow the advice of the United States with respect to deregulation."

"They didn't liberalize their capital markets, they didn't liberalize their financial markets, and so many of them are very thankful that they didn't listen to the American Secretary of the Treasury when he came there and yelled at them for reforms, and the result of that is their financial system is in much better shape."

Stiglitz pointed out that the system in which the dollar is the global reserve currency "has long been recognized to be unsustainable in the long run", but warned that the system's falling apart "can contribute a great deal to global instability".

The Nobel Laureate analyzed the impact of the crisis on the future of global development and said that "part of the problem that the world is facing today is this problem of inequality".

He added that some of the remedies being implemented by the industrialized nations "may exacerbate the problem of inequality", highlighting the fact that "we are bailing out American banks, and more accurately, we are bailing out American bankers."

He said that "fortunately, many of the developing economies did not follow the advice of the United States with respect to deregulation" and as a result "their financial system is in much better shape."

The lecture, part of the United Nations University series "Emerging Thinking on Global Issues" was supported by the Office of the President of the 63rd session of the United Nations General Assembly.